Haeger v. Goodyear Tire & Rubber Co.

• Decision Date: 20 July 2015
• Docket Number: 13–16801,13–16861,Nos. 12–17718,13–16862.,s. 12–17718
• Citation: 793 F.3d 1122
• Parties: Leroy HAEGER; Donna Haeger, husband and wife; Barry Haeger; Suzanne Haeger, husband and wife, Plaintiffs–Appellees, v. The GOODYEAR TIRE & RUBBER COMPANY, an Ohio corporation, Defendant–Appellant, and Spartan Motors, Inc., a Michigan corporation; Gulfstream Coach, Inc., an Indiana corporation, Defendants, v. Roetzel & Andress, LPA; Basil J. Musnuff, Movants. Leroy Haeger; Donna Haeger, husband and wife; Barry Haeger; Suzanne Haeger, husband and wife, Plaintiffs–Appellees, v. The Goodyear Tire & Rubber Company, an Ohio corporation, Defendant–Appellant. Leroy Haeger; Donna Haeger, husband and wife; Barry Haeger; Suzanne Haeger, husband and wife, Plaintiffs–Appellees, v. The Goodyear Tire & Rubber Company, an Ohio corporation; SPARTAN MOTORS, INC., a Michigan corporation; Gulfstream Coach, Inc., an Indiana corporation, Defendants, v. Basil J. Musnuff, Movant–Appellant Leroy Haeger; Donna Haeger, husband and wife; Barry Haeger; Suzanne Haeger, husband and wife, Plaintiffs–Appellees, v. The Goodyear Tire & Rubber Company, an Ohio corporation; Spartan Motors, Inc., a Michigan corporation; Gulfstream Coach, Inc., an Indiana corporation, Defendants, v. Fennemore Craig, P.C.; Graeme Hancock, Movants–Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

793 F.3d 1122

Leroy HAEGER;

Donna Haeger, husband and wife;

Barry Haeger;

Suzanne Haeger, husband and wife, Plaintiffs–Appelleesv.The GOODYEAR TIRE & RUBBER COMPANY, an Ohio corporation, Defendant–AppellantandSpartan Motors, Inc., a Michigan corporation;

Gulfstream Coach, Inc., an Indiana corporation, Defendantsv.Roetzel & Andress, LPA;

Basil J. Musnuff, Movants.

Leroy Haeger;

Donna Haeger, husband and wife;

Barry Haeger;

Suzanne Haeger, husband and wife, Plaintiffs–Appellees

v.The Goodyear Tire & Rubber Company, an Ohio corporation, Defendant–Appellant.

Leroy Haeger;

Donna Haeger, husband and wife;

Barry Haeger;

Suzanne Haeger, husband and wife, Plaintiffs–Appelleesv.The Goodyear Tire & Rubber Company, an Ohio corporation;

SPARTAN MOTORS, INC., a Michigan corporation;

Gulfstream Coach, Inc., an Indiana corporation, Defendants

v.Basil J. Musnuff, Movant–Appellant

Leroy Haeger;

Donna Haeger, husband and wife;

Barry Haeger;

Suzanne Haeger, husband and wife, Plaintiffs–Appelleesv.The Goodyear Tire & Rubber Company, an Ohio corporation;

Spartan Motors, Inc., a Michigan corporation;

Gulfstream Coach, Inc., an Indiana corporation, Defendantsv.Fennemore Craig, P.C.;

Graeme Hancock, Movants–Appellants.

Nos. 12–17718

13–16801

13–16861

13–16862.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 10, 2015.

Filed July 20, 2015.

Pierre H. Bergeron (argued), Squire Sanders LLP, Cincinnati, OH; George Brandon, Squire Sanders LLP, Phoenix, AZ; Jill G. Okun, Squire Sanders LLP, Cleveland, OH, for Defendant–Appellant/Defendant The Goodyear Tire & Rubber Company.

Mark I. Harrison (argued), Jeffrey B. Molinar, Osborn Maledon, PA, Phoenix, AZ, for Movant/Movant–Appellant Basil J. Musnuff.

Andrew M. Jacobs, (argued), Katherine V. Foss, Snell & Wilmer LLP, Tucson, AZ; James R. Condo, Lisa M. Coulter, Snell & Wilmer LLP, Phoenix, AZ, for Movant–Appellant Graeme Hancock.

John J. Egbert (argued), Jennings Strouss & Salmon, PLC, Phoenix, AZ; David L. Kurtz, The Kurtz Law Firm, Scottsdale, AZ, for Plaintiffs–Appellees.

Appeal from the United States District Court for the District of Arizona, Roslyn O. Silver, Senior District Judge, Presiding. D.C. No. 2:05–cv–02046–ROS.

Before: J. CLIFFORD WALLACE, MILAN D. SMITH, JR., AND PAUL J. WATFORD, Circuit Judges.

Opinion by Judge MILAN D. SMITH, JR. ; Dissent by Judge WATFORD.

OPINION

M. SMITH, Circuit Judge:

On November 8, 2012, after a six-hour evidentiary hearing, and after considering the record in the case and fifteen briefs filed by the potentially-sanctionable parties, then-Chief United States District Judge Roslyn O. Silver, of the United States District Court for the District of Arizona, handed down a sixty-six-page order (Order) imposing sanctions ultimately calculated in the sum of $548,240 against attorney Graeme Hancock (Hancock), and $2,192,961 jointly against attorney Basil J. Musnuff (Musnuff) and The Goodyear Tire & Rubber Company (Goodyear) (collectively the Sanctionees). In the Order, which included forty-nine pages of findings of fact and seventeen pages of legal analysis, Judge Silver found that “there is clear and convincing evidence that sanctions are required to be imposed against [ ] Hancock, [ ] Musnuff, and Goodyear. The Court is aware of the unfortunate professional consequences that may flow from this Order. Those consequences, however, are a direct result of repeated, deliberate decisions by [ ] Hancock, [ ] Musnuff, and Goodyear to delay the production of relevant information, make misleading and false in-court statements, and conceal relevant documents. [ ] Hancock, [ ] Musnuff, and Goodyear will surely be disappointed, but they cannot be surprised.”¹

Because the fraud and deceit practiced on the district court and the Plaintiffs by the Sanctionees was not discovered until after the underlying litigation had been closed and Plaintiffs had settled with Goodyear based upon the incomplete information provided by the Sanctionees, the district court imposed the sanctions in reliance upon its inherent power, and not under Federal Rule of Civil Procedure 11, or 28 U.S.C. § 1927.

The Sanctionees appeal from the judgment awarding the sanctions, arguing that the district court abused its discretion in relying upon its inherent power to impose sanctions, and in determining the amount and the nature of the sanctions imposed.

We affirm both the district court's monetary and non-monetary sanctions imposed against the Sanctionees.

FACTUAL AND PROCEDURAL BACKGROUND

In June 2003, Leroy and Donna Haeger, and Barry and Suzanne Haeger (collectively the Haegers, or Plaintiffs) were all seriously injured when one of the Goodyear G159 tires on the front of their motor home failed while they were driving on a highway, which caused their vehicle to swerve off the road and overturn. The Haegers retained attorney David Kurtz (Kurtz), who filed suit against Goodyear in 2005 in Arizona state court. The case was quickly removed to federal court by Goodyear. Goodyear was represented by Musnuff, who served as Goodyear's “national coordinating counsel” on all G159 cases, and Hancock, who served as Goodyear's local counsel in Arizona. Musnuff and Goodyear's in-house counsel, Deborah Okey (Okey), were responsible for reviewing and approving all discovery responses in the case.

Before releasing its G159 tire, Goodyear performed FMVSS119 Department of Transportation (DOT) tests, electronic post-production W84 high speed test data (High Speed tests), L04 heat rise test results (Heat Rise tests), DOT endurance tests, crown durability tests, and bead durability tests on the tire. Throughout discovery, the Haegers repeatedly sought the results of Goodyear's tests on the G159 tire. However, as detailed below, Goodyear, Musnuff, and Hancock failed to search for, and/or withheld these relevant and responsive G159 testing documents in violation of their discovery obligations to produce requested relevant documents, and to supplement prior disclosures. See Fed. R. Civ. Pro. 26, 34.

Goodyear served its Initial Disclosure Statement on the Plaintiffs on December 15, 2005, pursuant to Rule 26. The initial disclosures did not include testing information, and Kurtz promptly requested that Goodyear produce “[t]esting documentation regarding the G159 tires.” Nevertheless, Goodyear did not supplement the disclosures in its Initial Disclosure Statement. Goodyear propounded interrogatories asking for, among other things, “each legal theory under which you believe Goodyear is liable.” In response, on August 18, 2006, the Haegers articulated their theory of the case: “Prolonged heat causes degradation of the tire which, under appropriate circumstances, can lead to tire failure and tread separation even when the tire is properly inflated.” Additionally, the Haegers stated that when the G159 tire was used on motor homes, the tire produced a level of heat and degradation “which the tire was not designed to endure, leading to its premature failure.”

The Haegers served their First Request for Production of Documents (First Request), pursuant to Rule 34, in September 2006. “Request for Production Number 14” requested “[a]ll test records for the G159 tires, including, but no [t] limited to, road tests, wheel tests, high speed testing, and durability testing.” Goodyear objected to this request with a series of boilerplate objections, and failed to produce any documents. However, on November 1, 2006, in its supplemental response to “Request for Production Number 14,” Goodyear agreed to produce the FMVSS119 DOT tests for the G159 tire. On December 20, 2006, Kurtz sent Hancock a letter clarifying what had been requested:

Request for Production No. 14. We asked for test records for the G159 275/70R 22.5, including road tests, wheel tests, high speed testing, and durability testing. You objected, suggesting the test records were overly broad and unduly burdensome. You have only produced the DOT test data showing the tires were tested at 30 mph. My interest is in finding the rest of the test data. If there is any, it is your obligation to disclose it.

On January 2, 2007, Hancock wrote an email to Musnuff regarding “Request for Production Number 14,” stating:

We should either respond to any portions of Kurtz' 12.20 letter or figure out that we have a fight on our hands on these points and prepare a counter argument ... RTP 14. [...] [t]est records for all testing on this size G159 tire. Again, was the only testing at 30 mph or less? What speed testing/fleet testing did Goodyear rely on? Can/should we supplement since his theory is that this tire can't operate at 75 mph in the southwest for long periods?

On January 5, 2007, the Haegers's expert witness, David Osborne (Osborne), identified speed as a contributing factor in the G159 tire's failure in his expert report. In response to Osborne's report, Musnuff wrote to Hancock:

Osborne appears to draw the conclusion that the subject tire was only tested at speeds up to 30 mph from the fact that the only test data we produced is the DOT test data. Of course, our discovery response was limited to DOT test data because plaintiff had not yet identified their defect theory at that time. Now that plaintiffs are pinpointing speed as an issue, perhaps we need to supplement our discovery responses to show the testing of this tire at various speeds. Thoughts?

Musnuff also forwarded this email to Goodyear's in-house counsel, Okey, concluding “we should consider supplementing our discovery responses to show the testing of this tire at various higher speeds.” Despite Goodyear's understanding of its obligation to supplement its previous discovery responses, they were not supplemented.

Also in January 2007, one of Goodyear's tire engineers located the G159 tire's High Speed tests and Heat Rise tests. It is clear that the engineer delivered at least the High Speed tests to Musnuff because on February 12, 2007, Musnuff emailed the High Speed tests to Hancock. Neither Musnuff nor Hancock produced these tests to the...